It follows a $750,000 grant from the PGF last year for the urgent dredging of the fishing harbour, which had silted up.
The Grey District Council will chip in $200,000 towards the cost of the new dredge, which will be constructed locally by Dispatch and Garlick.
Parliamentary Undersecretary for Regional Economic Development Fletcher Tabuteau said yesterday the dredge would ensure the regional fishing fleet had a reliable and productive harbour.
"Last year the movements of vessels in the lagoon were restricted to high tide as water levels were reduced to less than a metre in places whereby fishing boats need a depth of 3m-4m at low tide to move freely," Mr Tabuteau said.
"The current state of the harbour threatens the viability of the high quantity of fishing fleet, which can total up to 70 boats during peaking fishing seasons, and also the local processing plants that rely on a regular supply of fish."
Without an affordable and permanent solution, the port would have to rent an expensive dredge, the minister said.
Some parts of the lagoon would remain undredged, leading to the risk that commercial fishing vessels ceased to operate out of Greymouth.
Grey Mayor Tony Kokshoorn welcomed the announcement as a breakthrough.
"I can't praise the PGF enough for coming to the party. Otherwise we would have been in deep trouble."
The council's $200,000 share would be loan funded, and would go to a special council meeting next week.
Without this the council would have been forced to bring back the Westport dredge in seven years' time, at a cost of $1.3million.
Mr Kokshoorn hoped the new dredge would be ready in about six months.
West Coast-Tasman MP Damien O'Connor said the Greymouth port was crucial infrastructure for future opportunities.
"Government has been funding and supporting co-operation between the two ports [Greymouth and Westport] on the West Coast - which are vital to the local economy.
"The reality of Greymouth port, though, is that it does require a tailor-made solution, so I very much welcome this investment."
The council will buy a long-reach digger on a pontoon, with a separate self-propelled bottom dumper barge.
"As there are none on the market, it will be custom-made at the foundry in Greymouth.
It will replace the current dredge, nicknamed by the fishing industry as "the lemon", which the council bought second-hand from Tasmania but now admits is inadequate for the job. - Greymouth Star
